Advance tax rules for capital gains and dividends from unlisted shares explained

Taxation on unlisted shares

If you are earning from unlisted shares, whether through capital gains or dividends, you may still need to pay advance tax in instalments. Today's Ask Wallet Wise query decodes taxation on unlisted shares.

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Do I have to pay advance tax for Long Term Capital Gains (LTCG) and Short Term Capital Gains (STCG) on unlisted shares? If advance tax is applicable on LTCG and STCG from unlisted shares, how should I discharge the liability? What is the tax on dividends from unlisted shares, and is advance tax applicable?

Expert Advice: Every taxpayer has to pay advance tax if the net tax liability, after deducting tax deducted at source (TDS) and tax collected at source (TCS), exceeds Rs 10,000 in a financial year. A senior citizen, however, is exempt from paying advance tax if he or she does not have any business income. In such cases, the tax liability can be discharged while filing the ITR by the due date.

The income tax department has fixed four dates for advance tax payments:

By June 15: 15% of tax liability
By September 15: 45 % of tax liability (cumulative)
By December 15: 75 % (cumulative)
By March 15: 100% (cumulative)

So, let’s say your total tax for the year is Rs 1 lakh. By June, you should part with Rs 15,000; by September, Rs 45,000 in total; by December, Rs 75,000; and by March, the full Rs 1 lakh.

Coming to your question, yes, you have to pay advance tax on both LTCG and STCG arising from all capital assets, including unlisted shares. For capital gains earned on or before 15th June, the liability must be discharged in the four quarterly instalments as per the prescribed ratio. For gains made in later quarters, you need to pay the arrears of the earlier instalments along with the current one.

Suppose your total capital gains tax liability is Rs 2 lakh — Rs 1 lakh in June and another Rs 1 lakh in September. You need to pay 15,000 (15% of Rs 1,00,000) on June 15 and 75,000 (30% of 1,00,000 for June transaction and 45% of Rs 1,00,000 for September transaction) by September 15.

Dividends from unlisted shares are taxed at your applicable income tax slab rate. However, for advance tax purposes, the same rules as explained above for LTCG and STCG will apply.

Disclaimer: The views expressed by experts on Moneycontrol are their own and not those of the website or its management. Moneycontrol advises users to check with certified experts before taking any investment decisions.

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